Canadian Marijuana Industry eying Foreign Countries for Growth

Canadian cannabis companies are now eying on countries like Spain, Italy and Colombia as the next growth opportunities after a flurry of consolidation at home.

The Aurora Cannabis Inc. has recently agreed to acquire MedReleaf Corp. for $2.9 billion ($2.27 billion U.S.), the largest deal to date in the marijuana industry. This followed Edmonton, Alberta-based Aurora’s agreement to buy CanniMed Therapeutics Inc. in January for roughly $1 billion and several smaller deals.

With 90 publicly listed companies, which have a market value of about $31 billion, Canada has emerged as a global leader in the pot industry as it becomes the first Group of Seven country to legalize the drug for recreational use later this year. On the other hand, a ban at the federal level keeps pure-play U.S. pot companies from major exchanges south of the border.

Dan Daviau, chief executive officer of Canaccord Genuity Group Inc., the leading Canadian investment bank in the sector said, “Recent mergers and acquisitions have given the companies the scale to start looking internationally for growth,” adding “Countries like Germany, for example, allow patients to be reimbursed for medical marijuana to treat a variety of symptoms.”

“The Canadian firms have the right cost of capital and industry knowledge to add value because the governments’ realization that the product is good for lots of different indications” he said.

However, the smaller Canadian firms also have plenty of options, he said.

“As the biggest isn’t always the best, the smaller guys and the guys in the middle need to decide what their strategy is,” Daviau said. “There are going to be some more big guys and some smaller niche guys.”

Graham Saunders, Canaccord’s vice chairperson and head of capital markets origination said, “All companies are in a race,” he said. “The faster you can use capital and deploy it properly and accretively, the better off you’re going be.”

Canaccord is hosting a cannabis conference in New York this week and has about 700 attendees enrolled.